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Douglas Schwartz Quoted in Daily Journal

04/22/2015 Daily Journal

Nossaman Partner Douglas Schwartz was quoted in the Daily Journal article, "Real Estate Tax Deferral Could Disappear," regarding his opinion on the potential repercussions if the capital gains tax deferral on real estate purchases is eliminated.

According to the article, Mr. Schwartz does not think 1031s will be touched this year, mainly because the real estate industry has such a powerful lobbying arm and also because he sees these exchanges as important tax breaks serving a strong business purpose.

"You really can't call it a tax shelter or a loophole," Mr. Schwartz said. "We have it so if someone buys a similar property to what they're selling, where do you get the money to pay the taxes without section 1031? Either the seller has to come up with it from a loan or other sources, or else the seller is simply going to hold on to the property a lot longer."

Mr. Schwartz added the resiliency of the California real estate market would prevent another recession even if the exchanges are eliminated. He did note, however, that the state's Franchise Tax Board sees 1031s as a target-rich environment and is strictly auditing them, putting taxpayers "through the ringer" and asserting back taxes for any perceived noncompliance with section 1031's complex rules.

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